NOTICES
PENNSYLVANIA PUBLIC UTILITY COMMISSION
Order
[35 Pa.B. 88] Public Meeting held
December 16, 2004Commissioners Present: Wendell F. Holland, Chairperson; Robert K. Bloom, Vice Chairperson; Glen R. Thomas; Kim Pizzingrilli
Investigation Regarding Intrastate Access Charges and IntraLATA Toll Rates of Rural Carriers and the Pennsylvania Universal Service Fund; Doc. No. I-00040105
Order By the Commission:
The Commission hereby institutes an investigation for consideration of whether there should be further intrastate access charge reductions and intraLATA toll rate reductions in the service territories of rural incumbent local exchange carriers (rural ILECs)1 and all rate issues and rate changes that should or would result in the event that disbursements from the Pennsylvania Universal Service Fund (Fund) are reduced.
This formal investigation will assist the Commission in determining what regulatory changes are necessary to 52 Pa. Code §§ 63.161--63.171 given the complex issues involved as well as the recent legislative developments.2 Subsequent to the formal investigation, the Commission will seek input from affected parties as we enter the formal rulemaking process.
Background
The Commission is responsible for assuring the maintenance of universal telecommunications services at affordable rates in Pennsylvania. Universal services are those telecommunication services ''essential for a resident of this Commonwealth to participate in modern society at any point in time.'' 52 Pa. Code § 63.162. Basic local service (access to public switched telephone network to enable a resident to make and receive telephone calls within the local calling area) is the only ''essential'' service today for purposes of the Fund, although the nature of basic universal service may evolve.
The affordability of basic local service is maintained in part by contributions to and disbursements from the Fund. Contributions are made by telecommunications carriers, with the exception of wireless carriers, that provide intrastate telecommunications services. Disbursements are made to ILECs operating in the Commonwealth, with the exception of Verizon Pennsylvania Inc. and Verizon North. Thus, the Fund helps to maintain the affordability of local service provided by all but the two largest ILECs in Pennsylvania.
The Fund was established in 1999 to simultaneously advance the Commission's policies of promoting competition in Pennsylvania's intraLATA toll markets and maintaining the affordability of basic local service. The relationship between the Fund, toll rates, and basic local service rates is governed by access charges. Access charges are the rates charged by LECs to other companies seeking access to the LEC's local loop in order to provide services to the end-user. A typical example of access charge usage is a competitive toll carrier (interexchange carrier or IXC) that wants to compete with the incumbent for an end-user customer's intraLATA toll call business. The IXC must pay time and distance sensitive access charges to the LEC for access to the local loop facilities that will connect the IXC with the end-user.
Traditionally, ILECs have priced access charges above cost as a means of generating additional revenues that can be used to subsidize local rates and, thus, keep basic local service affordable. The Commission endorsed this practice of subsidizing local rates with above-cost access charges in the days of monopoly service. In the 1990s, our policy evolved to favor competition in local markets and its associated benefits. It is now the Commission's policy to promote competitive local markets by bringing the ILEC's access charges closer to costs. Traditionally, the transition to cost-based levels have been achieved using revenue-neutral means to ensure there is a provider of last resort available to all consumers within the rural ILECs territories, to give the ILECs a reasonable amount of time to modernize their networks and ready themselves for competition, to avoid rate shock to the rural ILECs' end-user customers whose local rates would otherwise be increased to recover lost access charge revenue, and to avoid undue economic harm to the incumbent.
The Fund was conceived to be an interim funding mechanism operating during the period of access charge reform. According to the Commission's Order establishing the Fund, it was originally scheduled to expire on December 31, 2003. In 2003, the life of the Fund was extended to allow additional time to consider any and all rate issues and modification of Fund regulations. The extension was accomplished by approving a Joint Procedural Stipulation presented by industry stakeholders and statutory advocates of the public interest. For further discussion, see Access Charge Investigation per Global Order of September 30, 1999, Order (entered July 15, 2003), Docket Nos. M-00021596 et al, and, Re Nextlink Pennsylvania, Inc., Order (entered Sep. 30, 1999), 93 PaPUC 172, 196 P.U.R.4th 172, Docket Nos. P-00991648, P-00991649 (Global Order), at pp. 11-60 (Access Charges) and pp. 142-155 (Universal Service Fund/Carrier Charge Pool). See generally AT&T Communications of Pennsylvania, LLC v. Verizon North Inc. and Verizon Pennsylvania, Inc., Order (entered July 28, 2004), Docket No. C-20027195; and AT&T Communications of Pennsylvania, Inc. v. Verizon Pennsylvania, Inc., Docket No. M-00031694C0001.
Scope of the Investigation
As stated in our prior Order of July 15, 2003, at M-00021596, In re: Access Charge Investigation per Global Order of September 30, 1999, at 12, at that time we did not declare the access rates established by that Order as the final word on access reform. Rather, we characterized the Order as the next step in implementing continued access reform in Pennsylvania in an efficient and productive manner. The Order also agreed with the Petitioners that a rulemaking proceeding should be initiated no later than December 31, 2004, to address what if any modifications should be made to the Fund regulations and agreed to the simultaneous institution of an appropriate proceeding for consideration of any and all rate issues and rate changes which should or would result in the event that disbursements from the Fund are reduced in the future. We also indicated that the proceedings might be combined as one proceeding.
In the Commission's judgment, it is now an appropriate time to consider further access charge reform. Therefore, an investigation is hereby instituted to consider whether intrastate access charges and intraLATA toll rates should be further reduced in the rural ILECs' territories, and to consider any and all rate issues and rate changes that should or would result in the event that disbursements from the Fund are reduced or eliminated.3 This investigation will form the basis for any proposed regulatory changes and is an appropriate way to address the intention of our July 2003 Order in light of recent legislative changes. The USF rate issues (access charge rates, toll rates, local service rates) should be addressed in a full, formal investigation before any formal changes to the regulations are proposed and moved through the regulatory process. Consequently, the matter will be assigned to the Office of Administrative Law Judge for appropriate proceedings, including but not limited to, a fully developed analysis and recommendation on the following questions:
(a) Whether intrastate access charges and intraLATA toll rates should be further reduced or rate structures modified in the rural ILECs' territories.
(b) What rates are influenced by contributions to and/or disbursements from the Fund?
(c) Should disbursements from the Fund be reduced and/or eliminated as a matter of policy and/or law?
(d) Assuming the Fund expires on or about December 31, 2006, what action should the Commission take to advance the policies of this Commonwealth?
(e) If the Fund continues beyond December 31, 2006, should wireless carriers be included in the definition of contributors to the Fund? If included, how will the Commission know which wireless carriers to assess? Will the Commission need to require wireless carriers to register with the Commission? What would a wireless carrier's contribution be based on? Do wireless companies split their revenue bases by intrastate, and if not, will this be a problem?
(f) What regulatory changes are necessary to 52 Pa. Code §§ 63.161--63.171 given the complex issues involved as well as recent legislative developments?
Consideration should be given to applicable orders, regulations, policy statements and guidelines of this Commission, including any necessary changes occasioned by recent amendments to the Public Utility Code.4 The General Assembly has repealed 66 Pa.C.S. § 1325 (limiting local exchange service increases) and added 66 Pa.C.S. §§ 3011--3019 (governing alternative form of regulation of telecommunications services). We would expect, for example, the parties to address the policy and legal ramifications of new sections 3011 (declaring the policy of the Commonwealth), 3015(B) (governing rate changes for rural telecommunications carriers) and 3017 (providing that Commission ''may not require a local exchange telecommunications company to reduce access rates except on a revenue-neutral basis'' and limiting a competitive local exchange carrier's ability to charge access rates higher than the ILEC's rate). Act No. 183, P. L. _____ (Nov. 30, 2004).
We discourage any proposal or recommendation that would impede a reasonable consumer's ability to compare the cost and/or quality of available competing services. Plain language and clear descriptions are desired. See, e.g., 52 Pa. Code § 69.251.
The investigation will address the estimated rate impacts of any further changes to access charges and toll rates and will form the basis for any proposed regulatory changes; Therefore,
It Is Ordered That:
1. An investigation to consider whether intrastate access charges and intraLATA toll rates in rural ILECs' territories should be decreased and to consider any and all rate issues and rate changes that should or would result in the event that disbursements from the Pennsylvania Universal Service Fund are reduced and/or eliminated is hereby instituted.
2. The investigation is assigned to the Office of Administrative Law Judge for appropriate proceedings and a recommended decision.
3. A copy of this Order shall be delivered for publication to the Pennsylvania Bulletin.
JAMES J. MCNULTY,
Secretary
[Pa.B. Doc. No. 05-41. Filed for public inspection December 30, 2004, 9:00 a.m.] _______
1 There are approximately 32 rural ILECs operating in Pennsylvania. We are including Sprint/United as a rural ILEC. This Order is concerning only the rural ILECs' access charge reform. Verizon PA and Verizon North are non-rural ILECs and their access charge reform has been on a separate track at Docket No. C-20027195, AT&T Communications of Pennsylvania, Inc. v. Verizon North, Inc. At C-20027195, an Order was issued on July 23, 2004, which after a period of litigation, the Commission adopted a Petition for Resolution filed by Verizon PA, Verizon North, the Office of Consumer Advocate (OCA) and Office of Small Business Advocate (OSBA) as the first phase of access charge reform in Pennsylvania. Access charges are expected to be reduced in Verizon PA's and Verizon North's territories in February, 2005.
2 The General Assembly has repealed 66 Pa.C.S. § 1325 (limiting local exchange service increases) and added 66 Pa.C.S. §§ 3011--3019 (governing alternative form of regulation of telecommunications services).
3 This investigation shall remain separate from the pending proceeding before Administrative Law Judge Fordham at C-20027195 regarding Verizon PA's and Verizon North's access charge reform.
4 If applicable, federal reforms of the intercarrier compensation scheme should also be addressed.
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